candycorn
Diamond Member
Well, there is some gray area there.Capital gain taxes have, historically, little influence over actual investment. If anything, a lower capital gains rate increases both the amount of "speculation" and market variances, the beta.
It makes no sense, to tax capital gains at a lower rate than earned income. I mean if you tax the dudes that lease out the shovels less than the ones doing the digging, pretty soon everyone is going to own shovels and no one will want to dig.
I take home $1800 a week. I use $400 of that to buy a stock. That $400 is already taxed. So I can see an argument that when I sell some or all of that initial $400 investment for a profit, I shouldn’t be taxed again.
What is happening though is that the major shareholders often reinvest the dividends to buy more stock. That isn’t taxed. So if I bought 80 shares with that $400, after a few years, I have 100 shares or whatever. I sell 100 shares--20 of which were bought with money that was never taxed.
And, as I understand it, the portfolio becomes so large that they simply borrow money against it (money to live on) and sell shares to pay off the loan. So you pay taxes on what you sold to pay off a loan that isn’t taxed either.